BRAZILIAN LEGAL REGIME FOR SALES AGENTS

The sales agent agreement, as a type of “collaboration contract”, aims to promote business activities by increasing the distribution channel of products and services, making it possible to reach a greater number of companies and sectors in other countries or territories. Thus, generally, a company chooses to maintain sales agents in order to access markets in which there is still no justification (economical or business strategy) for incorporating a local branch.

Choosing the strategy of maintaining a sales representative is especially interesting when it comes to international trade, since hiring a local partner enables acquiring knowledge of local culture and local bureaucracies applicable to the sale of products and services in a specific country, facilitating access to potential customers with whom the sales representative may already be in contact or already have a relationship to present a new portfolio of products or services.

However, as in any international contract, it is important that, before adopting any measure to enter into an agreement with a sales agent, an attorney with knowledge on local laws is hired to assist in the identification of the applicable law to the matter, as well as in the presentation of guidelines, any legal limitations, risks and applicable forms of mitigation. Moreover, it is of high importance to evaluate the advantages and disadvantages of adopting the laws of a specific country, as well as whether the parties may agree to reject the laws of a specific country by a written agreement.

In the specific case of Brazil, sales agent agreements are regulated by a law that considered the context of sales of goods and services in 1965, which is not up to date to the current global scenario, as it provides a series of formal obligations to be observed by Brazilian sales agents to be classified as such, which must be observed by the companies that hire them, in compliance with Law No. 4,886/65.

Furthermore, Companies that intend to enter into an agreement with a sales agent in Brazil, should be aware that Law No. 4,886/65 protects the sales agents, adding a quite extensive list of rights and rules that must be observed in such agreements, in contrast to the broader and more general approach adopted by other countries.

For example, Law No. 4,886/65 sets for an obligation to indemnify the sales agent in the event of termination of the contract without cause, considering all the commissions received by the sales agent during the entire contractual relationship, and the parties cannot agree on a lower indemnification.

This is because, in the past, the sales agent was seen in Brazil as an economically-disadvantaged party of the contract, so, at the time, it was necessary to provide them with some legal protections.

Fortunately, Brazilian Judges have rendered decisions considering that such economical disadvantage is relative, and elements of the concrete case must be evaluated, such as the terms of the agreement between the parties and, mainly, the behaviors adopted by each of them throughout the contractual relationship.

Because of such recent changes, and considering the specificities of Brazilian law regarding sales agents, there are some interesting strategies that can be adopted by companies when hiring their sales agents, as well as in the management of their activities, which can be presented by a local lawyer familiar and up-to-date with the discussions on the matter.

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